In this episode of The Roadmap, Ted Jenkins sits down with Kevin Dailey, founder of Southern Kentucky Distillery, and Wes Pitchford, CEO of Mad Monkey Sports, to discuss the intricacies of starting a bourbon distillery. With the rise of the craft bourbon industry, Dailey discusses the financial, operational, and regulatory challenges involved, as well as the advantages of balancing large-scale and small-scale production.
Dailey transitioned from fuel alcohol to distilling after a high school friend reached out to him about establishing the distillery. He underscores that while Southern Kentucky Distillery is a significant investment, it is not as large as industry giants like Jim Beam or Maker’s Mark, nor is it a small craft distillery. With the capacity to produce 75 barrels a day, the distillery generates approximately 18,000 barrels a year.
The discussion also covers the classification of distilleries in Kentucky. Dailey explains that Class A distilleries, such as Jim Beam, are large-scale operations, while Class B pertains to smaller craft producers. His distillery qualifies as a large distillery, which brings certain restrictions, including limited options for self-distribution compared to smaller producers.
Distribution presents another significant challenge in the alcohol industry. Due to the U.S. three-tier system, distilleries typically cannot sell directly to liquor stores or bars; instead, they must work through intermediaries. However, some states allow for direct sales from the distillery store.
Dailey advises aspiring distillers that while the venture is expensive and complex, it can yield substantial rewards for those who navigate the challenges effectively. He and Pitchford also highlight the importance of competitor pricing and customer perceptions in premium markets like bourbon. Despite pricing pressures, they remain committed to producing high-quality products with exceptional flavor.
The conversation shifts to the collaboration with Mad Monkey, particularly on a cinnamon whiskey called Enfuego. Pitchford describes it as smoother than competitors like Fireball, aiming to create a fun, easy-drinking beverage without the harshness that often accompanies similar products.
“They [distilleries] all have different things about them… But we chose to be the size we are because we're looking forward to the future.” – Kevin DaileyThe Roadmap